IMF urges Lebanon to stick to its economic programme

26 March 2003
The IMF on 20 March published the results of its Article IV consultation with Lebanon, praising the authorities for their efforts at putting public finances in order while warning that the government must stick by its strong fiscal stance and privatisation programme. The introduction of VAT and spending restraints allowed the budget to register a primary fiscal surplus of 2.1 per cent of GDP in 2002, and the 2003 budget foresees another primary surplus of 4.6 per cent. Confidence in the Lebanese economy picked up throughout 2002, but was buoyed particularly by November's Paris II donors' conference, evident in strong inflows to the banking system, lower interest rates, and a recovery in foreign exchange reserves. However, the IMF warns that 'the way forward to strengthening economic vitality in Lebanon remains long and arduous'. A tight fiscal policy will have to be maintained for years to come, and measures taken to reduce expenditure through cutting the wage and pension bill. The report also urges Beirut to introduce a comprehensive income tax and consider raising VAT. On privatisation, the IMF encourages the government to adhere to its timetable, noting that telecoms privatisation has been 'somewhat delayed'. Transparency will also be crucial to investor and public support for the process, the report.

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